Sri Lanka's full economic recovery is 'not yet assured': IMF

Bankrupt Sri Lanka's economic recovery was "not yet assured", the International Monetary Fund has warned, after the first review of its $2.9 billion bailout aimed at restoring the island's finances.

The Washington-based lender of last resort said on Wednesday Sri Lanka had been unable to meet its revenue targets and ensure growth although it had tamed runaway inflation.

"Despite early signs of stabilisation, full economic recovery is not yet assured," the IMF said on Wednesday.

Sri Lanka's census office said inflation this month dropped to an eight-year low.

Year-on-year inflation of 1.3 percent in September was healthier than August's 4.0 percent and well below the soaring 69.8 percent when prices peaked a year ago.

Revenue still below expectations

Last year's economic crash sparked dire food, fuel and medicine shortages, as well as months of civil unrest that eventually toppled then-president Gotabaya Rajapaksa.

His successor Ranil Wickremesinghe has raised taxes and removed energy subsidies, but the IMF said state revenue was still below expectations.

An IMF delegation wrapped up their two-week mission to Sri Lanka without an announcement on releasing the second tranche of $330 million.

Colombo had expected that funding to be signed over at the end of the latest talks.

But the IMF said it was still reviewing "financing assurances" from external creditors on restructuring Sri Lanka's bilateral and private debt.

Colombo is in discussion with its private creditors to restructure Sri Lanka's international sovereign bonds, after defaulting on its $46 billion foreign debt in April 2022.

Talks are under way with bilateral lenders and part of the domestic debt has already been restructured.

China, which accounts for 52 percent of the island's bil ateral debt, has not made its position on restructuring public, but has agreed to support Colombo.